Blog Roll: European Union

 

Blog Roll: Venezuela

• Inflation in Venezuela
• Venezuela Growth Forecasts
• Latin American Futures

 

Malthusian Crisis in Ethiopia?

 

Wasn't Malthus Wrong?

The PBS NewsHour is reporting (here) that "millions ... [in Ethiopia] ... still face the risk of starvation as a result of drought conditions", even though the Civil War ended in November, 2022. The last time Ethiopia faced famine was in 1984. Last March, the World Food Program and the USAID suspended food deliveries because grain was being stolen, sold on the black market and not getting to those in need.

Why should I even bother trying to apply a Malthusian model to Ethiopia (ETH) when Nobel Laureate William Nordhaus and most of the Economics profession argue that a Neoclassical General Equilibrium model (the DICE model) apples to every region of the World-System and, supposedly, to every country in the World-System. Critics will argue that I am just trying to push the conventional Malthusian policy conclusion: Ignore the poor and hungry because feeding them will just increase their birth rate and further increase population pressure.

World-Systems Theory (WST) has an answer to the question of what is the appropriate model to apply to a particular country: It depends on the country's place in the hierarchical structure of the World-System. Is it a Core, Semi-peripheral or Peripheral country? Core countries are mostly Capitalist, Semi-peripheral countries are Mixed with some elements of Capitalism and Peripheral countries are, I would argue, Malthusian-agricultural economies living on the edge of repeated food crisis and domination by core and semi-peripheral countries.* Most readers will understand what a Capitalist or Mixed economy is because they live in one. But what is a Malthusian economy?

Thomas Robert Malthus (1766-1834) was an English economist, cleric and scholar (political economy and demography). He predicted, controversially, that if population growth exceeded the productive capacity (carrying capacity) of the economy, a Malthusian Crisis would result, where "positive checks" such as famine, war, drought, immigration, etc. would reduce population pressure. Only "preventive checks" (birth control, delayed marriage, etc.) would prevent these catastrophes because population growth would, if uncontrolled, always exceed the productive capacity of the economy.

Famines have occurred periodically in the history of Ethiopia according to records dating to the 9th Century. To say why these famines happened and that they are definitely not the result of population pressure would be amazingly arrogant. And, to say that Neoclassical Economic Theory applies to all countries and to all recorded history would be equally arrogant. In fact, none of the modern models can be tested on Ethiopia because, aside from sparse World Bank data after WWII (the WDI or World Development Indicators), data is very weak for Ethiopia (although there is more data for regions in Africa but still not enough to test the regional DICE model).

Still, Karl Marx (1818-1883) called Malthus' population principle a "libel on the human race" and Malthus himself the "reverend scribbler." Indeed, "every schoolboy knows that Malthus was wrong" (Benjamin Higgins, 1968). Julian Simon (1932-1998) has argued that the World's carrying capacity is essentially unlimited. On the other hand, Jared Diamond has documented that the Rwanda Genocide was the result of population pressure. Why is Malthusian Theory so controversial and requires current analysts to keep writing Why Malthus Is Still Wrong. The continuing confusion involves failing to differentiate between the "Malthusian Model," the evidence supporting it, the "Malthusian Policy Recommendations" and the World-System. This particular Model-Evidence-Policy-System confusion, however, is true of every mental or formal model and is worth understanding for the well-documented and simple Malthusian Model.

The Malthusian Model (MM) is the model on which all other models are implicitly based (see Table I). Usually population growth is taken as exogenous because Capitalist economies can accommodate the demands of an expanding population. The original MM was simply two equations: a linear one for production growth, Q, and a geometric one for population growth, N. The equations didn't interact as a system** and when growth in N exceed Q, a Malthusian crisis was triggered. Kenneth Boulding put (Q,N) together in a system, with no assumptions about functional forms, and we have the modern version. The MM System model uses the state of the system S=(Q-N) as an Error-Correcting Controller (ECC); when (Q>N) population can expand (a feedback effect) and when (Q<N) population will contract through "positive checks".

Measuring Crisis

The MM Systems Model can be estimated for Ethiopia after WWII using the WDI to determine the state of the Malthusian Crisis. The first step is to estimate a measurement model using data we have from the WDI. N and Q are the most complete series and, luckily, form the basic Malthusian model.

 Measurement Matrix 

      N     Q

[1,]  0.707 0.707

[2,] -0.707 0.707

 Fraction of Variance 

[1] 0.958 1.000

The Measurement matrix can be estimated using Principal Components Analysis (PCA). The components will be used to form the approximate state variables of the Malthusian System. When estimated, the first component is overall growth (ETH1 = 0.707 N + 0.707 Q) and the second component, the Error Correcting Growth Controller (ETH2 = 0.707 Q - 0.707 N). Growth explains 96% of the variance and the ECC explains 4%.

The Figure above shows ETH1 (Growth) and ETH2 (The Malthusian ECC) plotted over time. ETH2 enters negative Malthusian-Criss territory around 1990 and starts recovering after 2010 (the 1983-1985 Famine was the worst in a Century and started the downward slide in the Malthusian Crisis). Overall growth (ETH1) although wiggling a little over time was not permanently affected.

Typically, commenting on historical time plots is as far as historical analysis gets, Malthusian or not. But I want to estimate a system model and try to understand how trends are causally related. 

Modeling Results

Modeling forces the question of "What is the System?" World Systems Theory (WST) provides a framework for answering the question. Ethiopia (ETH) is a country embedded with in a system of other countries. 

Discussion

NOTES

* My identification of Ethiopia as a Peripheral Country is a little casual and can be debated (see Babones, 2005). In studying the WDI, one indicator of Peripheral status is simply the lack of information in the data set. Semi-Peripheral and Core countries are fully populated with data.

** We might criticize Malthus for not inventing Systems Theory (a Twentieth Century discovery) and Marx came close recognizing that social systems are "over-determined" (Wolff and Resnick, 2006). You can read more Marx and Engels on the Population Bomb here. Unified Growth Theory puts all these various approaches together in one model starting with the MM at low levels of growth or stagnation (the Malthusian Trap) and ending with the Steady State Economy.

Appendix: ECC Models

Appendix: Systems Model

Models have a compact R-code in dse and can be run easily in Snippets. Note that the RUL20 model is only unstable in the feedback components $F[3,3] = 1.03$. If you stabilize the third feedback component (e.g.,$F[3,3] = 0.98$)  the entire system is stable. 

===========

merge.forecast <-

function (fx,n=1) {

#

# Merges a forecast with the output data

x <- splice(fx$pred,fx$forecast[[n]])

colnames(x) <- seriesNames(fx$data$output)

return(x)

}

#

#

# RUL20  Russia (1950-2000)

#

# Measurement Matrix 

#    EN.ATM.CO2E.KT EG.USE.COMM.KT.OE NY.GDP.MKTP.KD SL.TLF.TOTL.IN SP.POP.TOTL

#[1,]        0.28209            0.4060         0.3336         0.4343      0.3721

#[2,]       -0.43993           -0.2199        -0.1359         0.1328      0.2266

#[3,]        0.06433           -0.1446         0.5944         0.0494     -0.3944

#     SL.UEM.TOTL.ZS     HDI      EF    KOF

#[1,]         0.1893 0.43400  0.2348 0.1948

#[2,]         0.4971 0.03409 -0.3950 0.5161

#[3,]        -0.3374 0.22538 -0.4878 0.2470

#

 #Fraction of Variance 

#[1] 0.5489 0.8484 0.9677 0.9814 0.9921 0.9975 0.9988 0.9995 1.0000

require(dse)

require(matlab)

AIC <- function(model) {informationTestsCalculations(model)[3]}

f <- matrix( c( 0.976658001, 0.02127754,  0.2249071, 0.161990376,

                     -0.008392259, 0.97543675, -0.2319674, 0.001666581,

                     -0.005587383, 0.09718186,  1.0312754, 0.035854885,

                      0.000000000, 0.00000000,  0.0000000, 1.000000000

),byrow=TRUE,nrow=4,ncol=4)

h <- eye(3,4)

k <- f[1:4,1:3,drop=FALSE]

RUL20 <- SS(F=f,H=h,K=k,

z0=c(0.161990376, 0.001666581, 0.035854885, 1.00000000),

              output.names=c("RU1","RU2","RU3"))

stability(RUL20)

#tfplot(simulate(RUL20,sampleT=20))

shockDecomposition(toSSChol(RUL20))

RUL20.data <- simulate(RUL20,sampleT=50,start=1950,noise=matrix(0,50,3))

m <- l(RUL20,RUL20.data)

#tfplot(m)

AIC(m)

tfplot(RUL20.f <- forecast(m,horizon=50))

RUL20.fx <- merge.forecast(RUL20.f)

#    Models have a compact R-code in dse and can be run easily in Snippets. 

#    The RU20 must be run first to provide input for #ETH20.

#

# W20 ETH (Ethiopia) Russia Input

#

# Measurement Matrix 

#       N  Q

#[1,]  0.707 0.707

#[2,] -0.707 0.707

#

#Fraction of Variance 

#[1] 0.958 1.000

#

require(dse)

require(matlab)

AIC <- function(model) {informationTestsCalculations(model)[3]}

f <- matrix( c(  1.04647269, -0.1059723, 0.10155553,

                        0.01918655,  0.9306230, 0.01335861,

                  0.000000000,  0.00000000,  1.00000000

),byrow=TRUE,nrow=3,ncol=3)

g <- matrix(c(-0.003819938, -0.01406381, 0.009235749,

                     -0.010773904, -0.01627134, 0.017135870,

                      0.000000000 , 0.00000000, 0.000000000

),byrow=TRUE,nrow=3,ncol=3)                      

h <- eye(2,3)

k <- f[1:3,1:2,drop=FALSE]

ETH20 <- SS(F=f,H=h,K=k,z0=c(0.11991149, 0.04457381, 1.00000000),

              output.names=c("Growth","(Q-N)"))

stability(ETH20)

shockDecomposition(toSSChol(ETH20))

ETH20.data <- simulate(ETH20,sampleT=50,start=1950,noise=matrix(0,50,2))

m <- l(ETH20,ETH20.data)

#tfplot(m)

AIC(m)

tfplot(forecast(m,horizon=50))

ETH20x <- SS(F=f,H=h,K=k,G=g,z0=c(0.11991149, 0.04457381, 1.00000000),

              output.names=c("Growth","(Q-N)"))

ETH20x

data <- TSdata(output=outputData(ETH20.data),input=RUL20.fx)

m <- l(ETH20x,data)

#tfplot(m)

AIC(m)

shockDecomposition(m)

tfplot(forecast(m,horizon=50,conditioning.inputs=RUL20.fx))

Blog Roll: Colombia

 

Posts

• Unstable cycles in Colombia
• Colombia's Globalization Bubble
• Six Futures for Colombia
• How Does the Economy of Colombia Work?

Blog Roll: France

 

The French government has collapsed again "less than 24 hours after its formation" (here). It seems like a good time to look back at what I have found about the French Economy:

• How is the French Labor Market Controlled? The role of World Markets for Agriculture and Oil.
• Has Austerity Helped or Hurt the French Economy? It's complicated but leads to a lot of Protest.
• Breaking Cycles of Austerity in France Find some way other than Austerity to control the Economy.
• La French TECH Cycles unlike Schumpeter's Creative Destruction cycles are stable.
• French Debt, Collapse of the Government and COVID-19 The lingering effects of the COVID shock are still with us and the French government is still preoccupied with Random Walk components rather than controlling the overall Economy.
• Six Futures for France A Steady State Economy or Growth-and-Collapse will not be accepted without Protest.
• World System: Steady State or Collapse The World System itself may be moving toward a Steady State Economy.
• How Does the Economy of France Work? The main controllers of the French Economy are not Austerity and Neoliberalism but rather the Environment and Unemployment.
• France in the Long Sixteenth Century Geopolitical Linkages between France and England have always been important historically.
• France (1450-1540) The Balance of Power System (Spain, France and England) began failing during this period.

There is certainly a lot more to learn about the French economy. The important conclusion, at this point in my research, is that France might be heading toward a Steady State Economy which will lead to a period of World-System Chaos before government's learn to deal with the end of growth or Environmental Collapse or are able to discover new growth technologies through Schumpeter's Creative Destruction.

Blog Roll: Ukraine

 The Russo-Ukrainian War began in 2014 and is still ongoing without any clear sign of resolution. What the Russian Invasion will mean for the Ukrainian Economy is not clear but it has been a sever shock to the system. On this page, I will list what I have learned so far about the  Ukrainian Economy and Russian Economy in the hopes of understanding what might happen in the future. I will continue to update this page as I learn more.

• Seven Futures for Ukraine The UAL20 BAU model with different inputs suggests that there are not many desirable attractor paths for Ukraine. Most attract paths are worse than a Random Walk, with only the Business-as-Usual (BAU) model and linking to the  Russian Economy being better.
• Five Futures for Russia Interestingly enough, the best future for Russia is linkage with the European Union! Google AI reports:
  
  
  
  
  
• Is the EU Heading for a Steady State? From the standpoint of conventional Neoclassical Economic Growth analysis, future prospects for the EU don't look that good either. The EU may become a Steady State Economy. From the standpoint of continued Environmental damage, this might be a good thing. From the standpoint of growth-obsessed Russia, it would be unattractive.

My objective at this point (since the future us unknowable) is to try to figure out how the Ukrainian Economy, the Russian Economy and the economies of the European Union work and understand how they will respond to the shocks of the Russo-Ukrainian War.

• The Ukrainian Economy
• The Russian Economy

For more information about how my State Space models are estimated and constructed, see the Boiler Plate.

Trump's Trade War: the World-System Perspective

 

The New York Times today posted two interesting graphics about Trump' Trade War (here): The country status (above) and the results ranked by 2024 Imports (below).

From the ranks (above) it seems that he is going after the money, targeting our biggest trading partners. The economic sense of this (if there is any) is Import Substitution Industrialization (ISI) for the US, a strategy typically employed by Global South countries. Basically, price imports so high that home-grown industries will develop to fill the gaps. Unfortunately, building factories and developing an ecosystem of suppliers takes times. In the mean time, prices in the home country (US) go up as are result of tariff expenses being added to list prices (remember when tariffs would be listed on automobile sticker prices).

By the time ISI would have any impact, Trump will be out of office.

Blog Roll: Syria

 

Blog Roll: Iran

 

Iran has been in the news lately after US and Israel bombings. However, the problems for Iran are really historically driven and go back to the immediate aftermath of WWII. I have state-space models of the Iranian economy from 1950 to the present and use the models to help understand Iran's historical development 

HINT: the Iranian economy is an historically driven economy not a Neoclassical Economy. 

Here's a blog roll:

• The Iranian Revolution Still being worked out today.
  
• A Deep Dive into the Iranian State Space Cycles vs. Control
  
• Will Israel and US Attacks Hurt the World-System? Yes
  
• How Does the Iranian Economy Work? Not like a Neoclassical, free-market economy.
  
• What was the Impact of the Iranian Revolution? Elimination of Cycles!
  
• Stabilizing the Iranian Economy Easy but not easy!
  
• Iranian Globalization and Unemployment created the discontent that led to the Iranian Revolution.
• Iran as a Neoclassical Economy US Technological domination!

Further reading:

• Iranian Revolution a series of events that culminated in the overthrow of the Pahlavi dynasty in 1979.

• Strait of Hormuz a strait between the Persian Gulf and the Gulf of Oman. It provides the only sea passage from the Persian Gulf to the open ocean and is one of the world's most strategically important choke points.

• Iran-Contra Affair a political scandal in the United States that centered on arms trafficking to Iran between 1981 and 1986, facilitated by senior officials of the Ronald Reagan administration

• Iran Nuclear Program one of the most scrutinized nuclear programs in the world, has sparked intense international concern.

• Pahlavi Iran the Iranian state under the rule of the Pahlavi dynasty. The Pahlavi dynasty was created in 1925 and lasted until 1979 when it was ousted as part of the Iranian Revolution, which ended the Iranian monarchy and established the Islamic Republic of Iran.

• Iran-Iraq War an armed conflict between Iran and Iraq that lasted from September 1980 to August 1988. Active hostilities began with the Iraqi invasion of Iran and lasted for nearly eight years, until the acceptance of United Nations Security Council Resolution 598 by both sides.

• Iranian Economy a mixed, centrally planned economy with a large public sector. It consists of hydrocarbon, agricultural and service sectors, in addition to manufacturing and financial services, with over 40 industries traded on the Tehran Stock Exchange.

• The White Revolution a far-reaching series of reforms to aggressively modernize the Imperial State of Iran launched on 26 January 1963 by the Shah, Mohammad Reza Pahlavi, and ended with his overthrow in 1979.

• Modernization Theory holds that as societies become more economically modernized, wealthier and more educated, their political institutions become increasingly liberal democratic and rationalist.

• Foreign Policy of the Kennedy Administration The United States foreign policy during the presidency of John F. Kennedy from 1961 to 1963 included diplomatic and military initiatives in Western Europe, Southeast Asia, and Latin America, all conducted amid considerable Cold War tensions with the Soviet Union and its satellite states in Eastern Europe.

• Sharia Law a body of religious law that forms a part of the Islamic tradition based on scriptures of Islam, particularly the Qur'an and hadith.

Why MAGA?

 

Sometimes I think I understand the MAGA Movement, other times I don't. ChatGPT (here) reports that there are a handful of reasons. The best I can say right now is that it is complicated. My favorite explanation, that aligns with historical analysis of the Nazi Movement, is Right-Wing Reactionism. The failure and humiliation of loosing World War I led Germany to Nazism. The failures for the US are not so clear, but let me just explore Economic failures in this post.

Everything seems to have come to a head during the COVID-19 Pandemic which was a strong shock to the US Economy and was handled very poorly by the first Trump I Administration (2017-2021).

MAGA and Big Tech

To me, the alignment of the MAGA movement and Big Tech continues to be surprising. I have worked in Tech all my life because of the intellectual challenges and the ability to get things done (estimating statistical models, specifically) that couldn't reasonably be done on a desktop calculator. I don't find anything about the MAGA movement intellectually challenging but the Tech Bros seem to see MAGA as a way to get things done. What exactly are they trying to get done and, what if anything is the intellectual attraction?
 

Boiler Plate

Notes

The first six indicators in standard scores are taken from the World Development Indicators (WDI). KOF = KOF Index of Globalization, EF = Ecological Footprint, HDI = Human Development Index. 

See the rest of the Boiler Plate here.

Why is it Important to Study Spain?

 

Right now, in the US, there is a lot of anti-Latin American sentiment being stoked by the neoFascist Trump II Administration. I live in the US Southwest have spent a lot of my life doing statistical analysis of Latin America (for example, here). My off-the-cuff explanation for the animosity toward the Southern Border is that Washington DC elites have little understanding or interest in what is happening in the US Southwest. The struggles of dark-skinned Latinos and Native Americans are just of no interest to the White power structure in the US.

Whatever the real reasons for nativist hostility, it would seem to me useful to study the history of the US Southwest starting with the Hapsburg Monarchy after the discovery of the New World by Spain. The map above (from Spain: the Center of the World 1519-1682) shows that the Hapsburg Empire initially controlled the US Southwest and the Spanish influence is evident everywhere in the present. Xenophobic politicians and their supports cannot simply get rid of Spanish culture by harassing Latin American immigrants. It is too deeply entrenched in the Southwest and too widely embraced by Americans living there.

In future posts, I will just reference this post rather than repeating my reasons for studying Spain in the US.

The Decline and Fall of Elon Musk and Steve Bannon

Elon Musk and Steve Bannon, two fellow travelers with the Trump II Administration, have gained a lot of notoriety for embracing pseudo-Nazi imagery and arguing (here) that the US will Decline and Fall for the same reasons that (supposedly) destroyed the Roman Empire: declining birth rates and declining morals. My analysis of the Decline of Rome (here) and that of a lot of historians, says they are wrong and deluded.

Tweaking the George Santana quote a little: Those who deliberately mis-remember the past are determined to repeat it. Because History is not the unbiased record we might wish it to be, it will always be selectively used and misinterpreted for political purposes. On the other hand, public misinterpretations of history offer an opportunity to educate citizens on things they evidently did not learn in school.

According to Steve Bannon (here), everything changed for Elon Musk when the Trump II Administration refused him access to a briefing on China. After that, Musk started to disappear from the Trump circle and appears to be going back to his troubled business interests (Tesla, SpaceX and StarLink). As for Bannon, the Anti-Defimation League (ADL, here) reports his fall starting in 2020, after which he was charged and jailed multiple times.

Evidently, the Trump II Administration prefers political operatives who do not draw too much public attention but still push the racist and draconian immigration policies of President Trump, operatives such as Stephen Miller.

So, where does this leave the analogy between the Fall of Rome and the current problems of the US Empire? The current Barbarian Invasion in the US involves the MAGA movement, the J6 attack on the US Capital, the Trump Administrations, the Proud Boys, the entire Alt-Right, Steve Bannon, Stephen Miller and Elon Musk.

ChatGPT reports that:

..the so-alled "barbarian invasions" were a mix of forced migration, opportunistic conquest, and reaction to Roman decline, rather than aimless destruction. Many of these groups sought to become part of the Roman world, not just destroy it.

The entire Alt-Right is filled with people who want to be in power and want to impose their views on the US. Throughout the Late 20th Century, they have failed. Now is their moment and if they do not succeed, they may well be happy just to destroy the system. 

Binyamin Applebaum, in the NY Times (here), provides an interesting analysis of Donald Trumps role in the growth and potential collapse of the US Empire. When Empires decline, barbarians see their opportunity. Let's hope that the US can stabilize itself after it's Empire has peaked in the same way that Amsterdam or London have. 

 

Magnitude of Trump Shocks

 

It seems that the US (and maybe the World System here) are in for some shocks from the Trump II Administration. Just yesterday, Trump seems to have imposed strong tariffs on every country in the World-System (except Russia) and countries (such as China) have instituted retaliatory tariffs. It's hard to understand why Trump is doing this: tariffs are against economic orthodoxy and against Republican economic free-trade orthodoxy. Maybe he was asleep in ECON 101 or maybe there is no explanation.

Here's another idea: Trump learned to like the botched COVID-19 Pandemic Response at the end of the Trump I Administration (2017-2021) and decided to impose his own Shock Therapy on the US and the World System. For a needy narcissist, it does get everyone talking about him!

The graphic above shows a time plot of Quarterly US GDP residuals from (2005,1) to (2024,1) produced by the USL20 policy model. The largest shock to GDP during this period was the bungled Trump Administration response to the COVID-19 Pandemic.

Can we expect another shock like the COVID-19 Pandemic shock from the Trump II Administration? Time will tell...